Discriminatory lending settlement funds set to go out soon

Hispanic and African-American borrowers who paid higher broker fees than white borrowers on mortgage loans from Provident Funding Associates from 2006 to 2011 will soon receive their share of a $9 million settlement.

Last year, the Consumer Financial Protection Bureau and the Department of Justice filed a complaint against Provident Funding, accusing the company of charging higher fees to minority borrowers based on their race or nationality, rather than their credit profile.

According to the complaint, Provident made over 450,000 mortgage loans between 2006 and 2011. The complaint stated that during that time period, Provident set a risk-based interest rate and then allowed brokers to charge a higher rate to consumers.

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The CFPB claimed that Provident would then pay the brokers some of the increased interest revenue from the higher rates. Provident’s mortgage brokers also had discretion to charge borrowers higher fees, unrelated to an applicant’s creditworthiness or the terms of the loan.

The complaint accused Provident of unlawfully discriminating against African-American and Hispanic borrowers in mortgage pricing through Provident’s broker compensation policies.

According to the CFPB, approximately 14,000 African-American and Hispanic borrowers paid higher total broker fees because of this discrimination.

Part of the consent order that accompanied the complaint stated that Provident would be required to pay $9 million into a settlement fund that would go to harmed African-American and Hispanic borrowers who paid higher interest or fees for mortgage loans.

Now, those borrowers are about to receive their money.

According to an announcement from the CFPB, African-American and Hispanic borrowers affected by Provident’s actions will receive packets over the next few days that contain instructions on how to participate in the settlement.

“If you are eligible, you will receive a participation packet that will tell you the specific minimum amount of money you will receive if you choose to take part in the settlement,” the CFPB tells the affected borrowers. “Your actual payment amount may be greater, depending on how many borrowers participate in the settlement.”

The CFPB cautions that borrowers should be on the lookout for “scammers” who may claim that borrowers need to use outside help or legal assistance to claim their settlement funds.

“Watch out for scammers claiming that they will help you for a fee or asking for your personal information in order to get your check,” the CFPB cautions.

“When large numbers of consumers get settlement money, scammers sometimes pop up,” the CFPB continued. “The scammer may charge you a fee or try to steal your personal information. While you are of course free to speak with a lawyer, you do not need to hire a lawyer or pay anyone a fee in order to participate in this settlement.”

According to the CFPB, affected borrowers have until Dec. 27, 2016 to submit their claim for funds from the settlement.

Ben Lane is the Senior Financial Reporter for HousingWire. In this role, he helps set a leading pace for news coverage spanning the issues driving the U.S. housing economy. Previously, he worked for TownSquareBuzz, a hyper-local news service. He is a graduate of University of North Texas.

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